Got a copy of this, it should be passed on.
ALAN BROOME, A.M
13 WILLOW STREET, LUGARNO
SYDNEY NSW 2210
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9 July 2014
Mr Patrick O’Connor
Director
Buccaneer Energy Limited
c/- Level 9, 25 Bligh Street
SYDNEY NSW 2000
Re: Public Statements by Buccaneer Energy Limited
Dear Mr O’Connor
As you are aware I was the Chairman of Buccaneer Energy Limited (“Buccaneer”) from the time of its initial public offering in late 2007 until my removal as a director on 2 July 2013. My removal was as a result of the actions of Meridian Capital, Buccaneer’s 19.9% shareholder.
I write to you after being contacted by a number of Buccaneer’s past directors and some of its largest shareholders. We are concerned that the recent announcements by the Company are not accurate and have the tendency to deflect responsibility for the recent Chapter 11 filing and the destruction of any value to shareholders to past directors and officers of the Company.
We are also concerned that statements within these releases may be false and misleading.
What cannot be argued is the fact that the current board of Buccaneer have been in control of Buccaneer since early December 2013, a period of 6 months prior to the Chapter 11 filing on 31 May 2014.
I think it worthwhile to recount events as evidenced through public filings and what I have been told by various parties.
Southern Cross # 1 well and West Eagle # 1 well
In your ASX Release dated 16 June 2014 you are correct that the costs of both of these wells were to be borne by EOS-Petro and the decision was made to proceed with each well prior to the confirmation of funding from EOS-Petro. However what is also evident from that release is that you have not disclosed the existing board’s involvement in the decision to proceed with both wells.
Mr Alan Stein joined the board on 6 September 2013. The Company mobilised the Endeavour jack-up rig on or about the 2 September 2013 and due to mechanical difficulties at the sight remained on location for a month before a decision was made to abandon the attempt and to demobilise the Endeavour.
ALAN BROOME, A.M
13 WILLOW STREET, LUGARNO
SYDNEY NSW 2210
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I understand that at no time did Alan Stein express any reservations regarding staying on location while EOS-Petro closed its financing.
At a board meeting prior to the Company’s 2013 AGM on 29 November 2013, I understand that management highlighted the high risk nature of the West Eagle # 1 well but a decision was made to obtain quotes to mobilise the Glacier # 1 rig to location and to spud the West Eagle # 1 well. At the same board meeting a resolution was approved to formally terminate the farm-in agreement with EOS-Petro and an ASX release was made to that effect.
The Glacier # 1 rig did not mobilise to the West Eagle drilling pad until after the appointment of both Mr Gavin Wilson and yourself to the board.
I now highlight your statement on 16 June 2014 made to the ASX:
“To solve the Company’s funding problems at the time, and despite warnings from senior management, the previous Board placed an unreasonable degree of reliance on securing funding via a farm out transaction with EOS Petro Inc., a counter party that itself had no funding. As a consequence of the failure of that transaction the Company was forced to carry 100% of the cost of drilling two wells which were unfortunately both unsuccessful”
Your statement shifts the responsibility to others whereas the current board partly or wholly contributed towards the decisions to proceed with the expenditure on these two wells. Given the facts, elements of your statement to the ASX appear to be misleading and should be corrected.
Termination of Curtis Burton
I have reviewed the public statements in respect to the suspension, termination / resignation of Mr Curtis Burton. I understand that on or about 3 March 2014 Mr Alan Stein and yourself visited Houston and informed Mr Burton that shareholders representing in excess of 30% of the Company’s shares would not support additional capital injections whilst he was CEO and his position was terminated. I understand that Mr Burton’s Company email account was suspended and he was immediately escorted from the building – to me that sounds like a termination.
I understand that shortly after, you conferred with Mr John Young of Conway MacKenzie and it was realised that Mr Burton’s termination gave rise to a substantial liability to the Company. A decision was made to retract the termination and retrospectively suspend Mr Burton, on full pay, pending an investigation.
ALAN BROOME, A.M
13 WILLOW STREET, LUGARNO
SYDNEY NSW 2210
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I understand that Mr Alan Stein and you terminated Mr Curtis Burton without receiving prior board approval or legal opinion as to the liability of such a termination would have for the Company. Mr Burton’s termination in the circumstances may have unnecessarily exposed the Company to a material liability.
I understand that there are video recordings which document the manner in which Mr Burton was terminated which is likely to reveal the true circumstances of his termination. I now highlight an ASX release made on 10 March 2014 where it states:
“…Mr Curtis Burton, Chief executive Officer and Managing Director, has been suspended with pay allowing for a review to be conducted.”
Given what I understand to be contained in these recordings it would appear that this statement may be misleading and as such in contravention of the ASX Listing Rules and Corporations Act.
Executive Contracts
The contracts with Mr Curtis Burton and Mr Dean Gallegos were entered into in July 2012. The remuneration packages set in those contracts were set after consultation with an independent Sydney based remuneration expert who conducted a peer comparison. The selection of the peer comparison was undertaken by the independent expert.
The contracts were drafted and reviewed by both the Company’s Australian and US attorneys, the termination provisions within those contracts were amended from the original drafts so as to comply with relevant regulatory requirements.
Effectively those termination provisions required shareholder approval for any termination benefits which were in excess of the maximum allowed under the Corporations Act. All issue of share options to executives who were considered a related party, including those two executives, were always approved by Buccaneer shareholders.
As you are aware there is no Corporations Act, ASX Listing Rule or Corporate Governance Principal that requires or recommends that executive contracts be approved by shareholders. In fact it would be considered unusual if executive contracts were voted on by shareholders of any company.
The execution of those contracts did not give rise to any immediate liability to the Company and as the contracts were executed after 30 June 2012, and were consistent with previous arrangements, there was no requirement to disclose the specific terms of those contracts until 2013 Annual Report that would be released in September 2013.
ALAN BROOME, A.M
13 WILLOW STREET, LUGARNO
SYDNEY NSW 2210
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So as to maintain transparency the board at that time disclosed the terms of these contracts in both the 2012 Annual Report and 2012 AGM Notice of Meeting. During my time as a director, the Company was transparent with shareholders in respect to all matters concerning remuneration. Until the emergence in late 2013 of a Singapore based shareholder, the approval for the Company’s Remuneration Report at all previous AGM’s was in excess of 90% of shares that voted.
I now highlight your statement on 16 June 2014 made to the ASX:
“It also became apparent to the new Board that the Company had entered into new employment contracts with certain members of the executive management of the Company on terms that were, in the new Board’s opinion, imprudent, and in some cases appeared to have been constructed so as to avoid the need to seek shareholder approval. While this in itself is not the cause of the Company’s current financial distress it is indicative of a culture that existed in the Company at the time of the existing Board’s appointment that, in the Board’s opinion, was not conducive to good governance”
Given the facts this statement is false and misleading. It also defames the non-executive directors whose task it was to ensure that the Company operated within the law and complied with the ASX Corporate Governance Principals.
Current Board’s Contribution
Since the appointment of Mr Gavin Wilson and yourself on 6 December 2013 the only material transaction initiated, negotiated and concluded by the current board appears to be the refinancing of Buccaneer’s secured debt facility with Meridian Capital (the “Meridian Financing”), also Buccaneer’s 19.9% (and largest) shareholder.
It is not clear to me whether the various relationships between the board and Meridian Capital have been fully disclosed. Mr Gavin Wilson is a board representative of Meridian Capital. I now understand that Mr Alan Stein had a prior relationship with Mr Gavin Wilson of Meridian Capital and you were nominated to the board by Alan Stein.
As evidenced in US Bankruptcy Court Docket # 95 there are other significant Singapore based Buccaneer shareholders (the “Singapore Shareholders”) who are of the opinion that the Meridian Financing was in fact a loan to own and they appear to want the matter considered by the US Courts. This assertion is especially poignant given that Meridian Capital and the Singapore Shareholders collaborated to remove directors at shareholder meetings held on 2 July 2013 and 29 November 2013.
ALAN BROOME, A.M
13 WILLOW STREET, LUGARNO
SYDNEY NSW 2210
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On refinance of the secured debt by Meridian Capital on 25 January 2014 the Company effectively had until the 30 June 2014 to repay Meridian Capital.
I understand that after the 25 January 2014 Company management and the board made a number of proposals to Meridian Capital which were rejected. However I also understand that in early February 2014 management also recommended to the board to approach Credit Suisse to refinance the Meridian Debt with a new long dated facility. Credit Suisse had previously provided a Term Sheet, but when asked the board chose not to pursue this as a viable option to repay Meridian Capital.
Retraction
Your statement to the ASX on 16 June 2014 in respect to the Executive Contracts has defamed me as a former director and Chairman of the Company.
I, along with the other former directors, demand a retraction (in a form to be agreed) be issued to the ASX. As you mailed the ASX Release dated 16 April 2014 to all shareholders I will also require that the retraction be mailed to all shareholders at the Company’s expense.
Alan Broome, A.M
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